Deferred measures may be back on table as GST mop-up continues to tank

The steady slide in revenue mobilisation under the goods and services tax (GST) regime and the expectation of continuing strain on collections even for December, the government is considering revisiting options such as invoice-matching and the reverse charge mechanism that were earlier deferred due to concerns raised by businesses, two people close to the development said.

The GST Council is expected to look at matching of GST returns and the corresponding invoice-matching before the start of the next financial year, they said. A further rationalisation of GST rates is also expected to be put on hold till the government is able to rebuild a revenue buffer, as was the case when the previous round of rate cuts was undertaken in November. “Options such as reverse charge mechanism and e-way bill were deferred in a hurry and need to be brought back as there is tax evasion, which is also reflecting in lower revenues. There was a surplus of Rs 10,000 crore when the GST Council had announced the cut in GST rates on over 200 items last month and to undertake any similar rate rationalisation in the future, the government first needs to gain comfort on the revenue front,” one of the persons cited above said.

The GST Council had earlier deferred matching of returns and reverse charge mechanism, wherein the liability to pay tax is on the recipient of goods or services instead of the supplier of such goods or services in respect of the notified categories of supply.

It is learnt that there is a view among the GST Council members that invoice matching was a key feature of the regime when it was envisaged and now six months after rollout, it has been felt that there is need for a renewed push towards the feature after having already decided for an early implementation of the e-way bill system. “The work for undertaking matching of GST returns is underway and is expected to be in place by the end of this financial year,” the second person said.

With the slippage in October GST revenue to below the projected monthly target of Rs 91,000 crore at Rs 83,346 crore (as on November 27), Finance Secretary Hasmukh Adhia had called a meeting of officials from states and union territories on December 9 to discuss ways to boost tax revenues. Following the meeting, the GST Council had met on December 16 and decided for an early implementation of e-way bill system. The Council had approved February 1, 2018 as the date for mandatory rollout of e-way bill system for inter-state movement of goods across the country and June 1 as the date for e-way bill system for both inter-state and intra-state movement of goods, with states having the provision to choose their own deadlines for implementation of e-way bill for intra-State movement of goods before June 1, 2018.

GST mop-up for November slipped to Rs 80,808 crore (as on December 25). The impact of GST rate cut on over 200 items that became effective from November 15 was reflected in the collections, which are about 14 per cent lower than the Rs 94,063 crore recorded for July (as on August 31) and about 11 per cent lower than the Rs 91,000 crore target.

The GST Council will meet on January 18 to discuss the finances of both Centre and states and utilisation of unused Integrated balance of over Rs 2 lakh crore against the tax liability of IGST, CGST and SGST, in that order. State and central officials will meet on January 11 before the Council meeting to discuss the issues related to tax collections under the GST regime.